Primary sees new deal from American Homes; SCE Trust-linked issues busy, better

By Stephanie N. Rotondo

Seattle, July 10 – The preferred stock market was kicking the new week off with a new issue, as American Homes 4 Rent sold $115 million of 5.875% series G cumulative redeemable preferred shares.

Initial price talk was 5.875% to 6%. The deal was originally expected to be $100 million.

Wells Fargo Securities LLC, BofA Merrill Lynch and Raymond James ran the deal.

Shortly before pricing, the preferreds were seen at $24.92 bid, $24.95 offered in the gray market. Post-pricing, the issue was pegged at $24.95 bid, $24.97 offered.

The paper becomes redeemable on July 17, 2022 or upon a change of control.

Proceeds will be used in part to pay down debt.

As for the Agoura Hills, Calif.-based real estate investment trust’s existing issues, the 5% series B cumulative participating preferred shares (NYSE: AMHPrB) were up 3 cents at $28.45.

However, trading in that issue was limited.

In fact, overall trading continued to be a little light. Market indicators were also mixed.

The Wells Fargo Hybrid and Preferred Securities index was down 3 basis points, while the U.S. iShares Preferred Stock ETF was up 13 bps.

One market source noted that while “volume is slowly picking up,” he did not expect there to be any significant ramp up in activity ahead of bank earnings.

Bank earnings season starts on Friday.

The secondary side-step

In the secondary space, Southern California Edison’s SCE Trust IV-linked 5% cumulative trust preference securities (NYSE: SCEPrL) were one of the most active securities, as the paper moved above par.

The preferreds were up 17 cents at $25.15, with almost 585,000 shares changing hands.

There was almost as much trading in SCE Trust I’s 5.625% trust preference securities (NYSE: SCEPrF), an issue that is being called on July 19.

The paper added a penny in Monday trading, closing at $25.12.

Nearly 512,000 shares were traded during the session.

Meanwhile, Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) topped the charts, with about 1.08 million shares exchanged.

The preferreds closed off 3 cents at $5.42.

Over 432,000 of the preferreds traded.

Also weaker were Royal Bank of Scotland Group plc’s 6.6% series S noncumulative dollar preference shares (NYSE: RBSPrS), which fell a dime to $25.80.

A market source said there was “nothing major” out to cause the weakness or the surge in activity.

But last week it was reported that due to the European Union’s insistence, the Edinburgh, Scotland-based bank – which was bailed out by taxpayers in 2008 – shed certain assets to shore up its bottom line may have actually done a disservice to the company, as well as taxpayers.

In fact, because RBS had to sell off those assets at a discount, it is estimated that both bank and taxpayers lost up to £15 billion, as the value of the sold assets improved significantly after the sales.

The loss in value is further exacerbated by the fact that there is no plan to divest the taxpayers’ 72% stake in the bank.

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